Australian FOREX Weekly Outlook 05/11/2007

Focus on RBA, ECB and BoE rate announcements.  

05/11/07                                                                                                                                                                                                                 

last week’s currency trading review

The Dollar remained heavily pressured throughout the week as market pre-empted rate cuts by the FOMC on the October 31. In light of recent market distress, the Federal Reserve chose to cut rates for the second time in two months, by a further 25 basis points with a 9 to 1 vote materializing. Accompanying comments remained neutral with the officials stating that “the upside risk to inflation roughly balances the downside risk to growth”. The Federal Reserve also moved to cut the discount rate to other lending institutions by another 25 basis points. Other key data out of the U.S. surrounded the October payrolls data on Friday which surprised on the upside coming in well above expectations at 166K (Forecast: 80K). The Euro was well supported throughout the week attributed to hawkish comments from the ECB, fuelling expectations that the Central Bank may move to increase interest rates. The Euro traded at a record high on Friday of 1.4528. The Euro closed last week at 1.4503 having opened earlier in the week 1.4385. The Japanese failed to gain any support from economic data, with Unemployment jumping to 4%, well above the previous 3.8%. Furthermore the BoJ kept rates on hold on Wednesday to no surprise. The JPY closed last week at 114.60 having started the week at 114.12. The GBP continued to strengthen on growing expectations that the BoE is likely to keep rates on hold for the remainder of 2007. The Sterling Pound closed last week at 2.0892 having opened at 2.0522. The AUD was boosted by a positive reading in Retail Sales for the month, prompting investor to price in rate hikes this week. The AUD broke through key resistance levels to trade at fresh 23 year highs. The AUD closed last week at 0.9160 having opened at 0.9117.

The forex trading week preview

In the States following last weeks heavy slate of data, news in the US will take a back seat with much of the emphasis being placed speeches from central bank officials, with Bernanke scheduled to speak on both Tuesday and Thursday. Non-Manufacturing ISM (Monday) and Michigan sentiment survey on Friday the key data releases. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone much attention to be placed on Thursday’s ECB rate announcement. Prior to that, Tuesday’s PMI services, PPI and Retail sales on Wednesday will prove eventful. In the UK As per usual the BoE have timed their interest rate announcement on Thursday to coincide with the ECB’s decision. Heavy slate of manufacturing data throughout the week is scheduled out of the UK. We will provide our previews and reviews of these data releases in the daily summary.

In Japan plenty of emphasis placed on Governor Fukui’s speeches throughout the week as well as BoJ minutes for the September meeting. We will provide our previews and reviews of these data releases in the daily summary.

In Australia all focus being placed on RBA interest rate announcement on Wednesday. We will provide our previews and reviews of these data releases in the daily summary.

• Gold – 807.10 Initial support at 777.10 (Oct 31 low) followed by 768.80 (Oct 26 low). Initial resistance is now at 808.25 (Nov 2 trend high) followed by 810.00 (Round number resistance)